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2018 (5) TMI 1979 - AT - Income TaxClaim of deduction otherwise than by a revised return - Grounds raised before the appellate authority for the first time without raising the same before the AO by filing the revised return of income during the assessment proceedings - Characterization of income - subsidy received by way of sales tax remission under the West Bengal Incentive Scheme 1999 for setting up an industrial unit - revenue or capital receipt - HELD THAT - Hon ble Supreme Court in National Thermal Power Co.Ltd. vs CIT 1996 (12) TMI 7 - SUPREME COURT , Jute Corporation of India 1990 (9) TMI 6 - SUPREME COURT both passed by the Hon ble Supreme Court as well as order passed by the Hon ble Calcutta High Court in the case of Mayank Poddar HUF 2003 (2) TMI 45 - CALCUTTA HIGH COURT held in favour of the assessee by observing that if in law the assessee was not liable to be assessed on capital gains arising on transfer of agricultural land then the assessee s claim for its non assessability cannot be denied merely because in the return filed the assessee had mistakenly offered to pay tax on such income - CIT(A) has rightly exercised his jurisdiction in entertaining the additional grounds of exclusion of capital subsidy received by way of sales tax remission under the West Bengal Incentive Scheme 1999 during the year under consideration. Sales tax subsidy received by the assessee from West Bengal Government was in the nature of capital receipt and therefore not liable to tax under the deeming provisions of section 115JB of the Act.
Issues Involved:
1. Whether the CIT(A) was correct in not providing a clear finding on the nature of the sales tax remission subsidy. 2. Whether the CIT(A) erred by not adhering to the Supreme Court's decision in Goetze (I) Ltd. vs. CIT regarding the necessity of filing a revised return for new claims. Issue-wise Detailed Analysis: 1. Nature of Sales Tax Remission Subsidy: The Revenue challenged the CIT(A)'s decision, arguing that the CIT(A) did not clearly determine whether the sales tax remission subsidy was for business expansion (capital in nature) or for working capital (revenue in nature). The CIT(A) had allowed the assessee's claim that the subsidy was a capital receipt, not taxable under the Income Tax Act, 1961, as it was received under the West Bengal Industrial Incentive Scheme, 1999, for setting up an industrial unit. During the appellate proceedings, the assessee argued that the subsidy, being a capital receipt, should be excluded from the assessable profits. The AO objected, stating that this issue was raised for the first time during the appellate proceedings and no revised return was filed. The AO also argued that there was no provision in the Act for such a deduction or exemption. The Tribunal, referencing judgments from the Supreme Court and the Calcutta High Court, upheld the CIT(A)'s decision, affirming that the appellate authority has the jurisdiction to entertain fresh claims even if not made before the AO. The Tribunal found that the CIT(A) rightly exercised jurisdiction in entertaining the additional grounds for exclusion of the capital subsidy. 2. Adherence to Supreme Court Decision in Goetze (I) Ltd. vs. CIT: The Revenue contended that the CIT(A) failed to follow the Supreme Court's decision in Goetze (I) Ltd. vs. CIT, which mandates that any new claim for deduction must be made through a revised return. The Tribunal, however, noted that the Supreme Court's decision in Goetze (I) Ltd. was limited to the power of the assessing authority and did not restrict the appellate authorities from entertaining new claims. The Tribunal cited the Bombay High Court's judgment in CIT vs. Prithvi Brokers & Shareholders Pvt. Ltd., which clarified that appellate authorities could adjudicate claims not made before the AO. The Tribunal also referenced its own decision in DCIT vs. Ramesh Chandra Kedia, supporting the CIT(A)'s jurisdiction to consider new claims. Conclusion: The Tribunal concluded that the CIT(A) correctly entertained the additional grounds for exclusion of the capital subsidy received by way of sales tax remission under the West Bengal Incentive Scheme, 1999. The Tribunal also upheld the CIT(A)'s decision to treat the subsidy as a capital receipt, not chargeable to tax, in line with the Calcutta High Court's judgment in CIT vs. Rasoi Ltd. and other relevant precedents. The Revenue's appeal was dismissed, affirming the CIT(A)'s order. Order Pronouncement: The appeal by the Revenue was dismissed, and the order was pronounced in the Court on 31.05.2018.
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